Crypto Venture Capitalists Reveal Their Investment Criteria and Focus Areas for 2025

In a recent interview with Cointelegraph, Deng Chao, CEO of institutional asset manager HashKey Capital, shared his optimistic outlook on the future of crypto venture capital investment. According to Chao, 2025 will see an influx of capital from venture capitalists (VCs) into various crypto projects.

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Increased Digital Asset Valuations and Regulatory Tailwinds

Chao attributes this growth in VC investments to the increased digital asset valuations in 2024 and the tailwinds from the re-election of Donald Trump in the United States. As Chao noted, "As we enter into a supportive macro environment driven by stimulative US policies and the formalization of crypto regulatory frameworks, these macro tailwinds are set to drive more VC investments heading into 2025."

This positive sentiment is echoed by a recent report from Silicon Valley Bank, which highlights the growing trend of VC investment in crypto projects. As shown in the chart below, VC investment in crypto has surpassed other tech sectors:

Source: Silicon Valley Bank

Despite this optimism, Chao cautions that macro risks, including geopolitical tensions or increased deficit spending, could increase price volatility and uncertainty in the new year.

Real-World Asset Tokenization and Emerging Markets

One area where VCs are particularly interested is in real-world asset (RWA) tokenization. According to Chao, stablecoins were the strongest proven use case for crypto in 2024, with VCs increasingly focused on stablecoin usage in emerging market economies.

The Growth of Stablecoins and Real-World Asset Tokenization

Dollar-pegged stablecoins are being increasingly used as a store of value by individuals in countries with rapidly depreciating local fiat currencies or strict capital controls. The growth of the stablecoin sector has been rapid, with a total market capitalization of over $100 billion.

The Benefits of Stablecoins and RWA Tokenization

Stablecoins offer several benefits to users, including cheaper fees, near-instant finality times, and no bank account required. This makes dollar-pegged stablecoins a viable method of providing banking services to the unbanked.

According to the World Bank, an estimated 1.4 billion people lack access to adequate banking services. This lack of banking services is primarily due to insufficient infrastructure in developing countries – a problem that can be solved by smartphones with internet access and crypto wallets.

The Projected Growth of RWA Tokenization

The real-world asset tokenization sector, which includes government securities, stocks, corporate bonds, stablecoins, collectibles or any other asset tokenized on a blockchain ledger, is projected to reach up to $30 trillion by 2030.

VC Investment Set to Increase in 2025 but Falls Short of 2021 Peak

Market analyst Infinity Hedge predicts that crypto VC investment in 2025 will surpass last year’s levels but won’t approach the peak recorded during the 2021 bull market. Crypto companies raised approximately $13.6 billion in 2024 compared to $10.1 billion in 2023.

Projected Growth of VC Investments in Crypto Projects

According to market data platform PitchBook, VC investments in crypto projects are projected to grow to $18 billion in 2025. A recent report from Galaxy Digital also forecasted VC investments in crypto projects to grow 50% year-over-year in 2025 but will fail to reach highs established in 2021-2022.

Conclusion

In conclusion, the future of crypto venture capital investment looks bright, with an expected influx of capital from VCs into various crypto projects. While macro risks may pose a challenge, the growth of stablecoins and RWA tokenization sectors is set to drive this growth in VC investments. As Chao noted, "As we enter into a supportive macro environment driven by stimulative US policies and the formalization of crypto regulatory frameworks, these macro tailwinds are set to drive more VC investments heading into 2025."